The infrastructure development in the country is being hit hard by a slow pace of reforms and limited long-term funding options and this trend can deter the economic growth, rating agency Standard and Poor's has warned.
In a report analysing the key factors hindering the infrastructure growth in the country, S&P has said that the government has stepped up infrastructure spending in recent years, but a slow pace of reforms and a lack of long-term funding options were constraining the sector's growth.
"India's inadequate infrastructure is a major roadblock to the country's target of achieving a 9-9.5% annual growth in 2012-2017," said the report, titled "Can India's developing infrastructure keep pace with economic growth?"
"An immediate consequence of increasing urbanisation in India in recent years has been manifold growth in demand for infrastructure," S&P's credit analyst Rajiv Vishwanathan said adding that the demand is likely to keep increasing in step with growth in the Indian economy.
In order to keep up the pace of infrastructure development, reforms are necessary to create a robust framework with transparent policies for project execution and funding, S&P said.
"Constraints in securing clearances, land rights, and long-term funding could cause companies to fall short of their targets," Vishwanathan added.
The country's power deficit is fueling demand for energy projects, while rapid industrialisation and urbanisation are creating an urgent need for efficient road and rail network and other improvements in infrastructure, Vishwanathan added.
The twelfth five-year plan focuses on removing some of these roadblocks and creating a sustainable framework for private-sector participation.
"The fate of the infrastructure sector over the next few years will depend on the ability of India's leaders to execute these plans," the report said.
In August, Prime Minister Manmohan Singh had said that investments on creation of infrastructure have gone up by one-and-a-half times as a percentage of the GDP during the last seven years of the UPA government's rule.
"In the 12th Plan (2012-17), we will further accelerate investment in infrastructure. We will pay special attention to the remote areas of our country and to rural areas. Connecting such areas by rail and road will get the top-most priority," Singh had said.
The Planning Commission envisions doubling the investment in infrastructure sectors to $1 trillion (about Rs 45 lakh crore) during the 12th Five-Year Plan.
